Problem 6-20 (Algo) CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO6-1, L06-3, L06-4, L06-5, L06-6, LO6-8] Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost Last year, the company sold 64,000 of these balls, with the following results: Sale (64,000 balle) $ 1,600,000 Variable expenses 160,000 Contribution margin 640,000 isced expenses $27,000 et operating income Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level 2. Due to an increase in tabor rates, the company estimates that next year's variable expenses will increase by $3.00 per baltif this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2) above, if the expected change in variable expenses takes place, how many balls will have to be sold next 4 Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs, it Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement to), what selling price per ball must it charge next year to cover the increased labor costs? 5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls? 6. Refer to the data in (5) above 3. If the new plant is built, how marry balls will have to be sold next year to earn the same net operating income, $213,000, as fast 0 213,000 year? would be the company's new CM ratio and new break-even point in balls? 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $213,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 64,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req Reg 4 Reqs Reg 6 Reg 68 Compute(s) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. (Round "unit sales to break even to the nearest whole unit and other answers to 2 decimal places.) CM ratio Unit sales to break even Degree of operating leverage balls company 64,000 balls the same number as solde year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Red Reg 2 Req3 Reg4 Reg 5 Reg 6A Reg 68 Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. It this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? (Round "CM ratio to 2 decimal places and "unt sales to break even to the nearest whole unit) CM ratio % Unit sales to break even balls Req1 Req3 > Complete this question by entering your answers in the tabs below. Reg 4 Reg 1 Reg 2 Reg 3 Reqs Reg 6A Reg 68 Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $213,000, as last year? (Round your answer to the nearest whole unit.) Number of balls b. Assume the new plant is built and that next year the company manufactures and sells 64,000 balls (the same number as sol year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Req1 Reg 2 Reg 3 Reg 4 Reqs Reg 6 Reg 68 Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. It Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 18), what selling price per ball must it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places) Selling price ( Req3 Reqs > year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Req1 Reg 2 Req3 Reg 4 Reg 5 Reg SA Reg 68 Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls? (Round "CM ratio to 2 decimal places and Unit sales to break even to the nearest whole unit.) Show less CM ratio Unit sales to break even ball b. Assume the new plant is built and that next year the company manufactures and sells 64,000 balls (the same number year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg Regs Red SA Reg 68 If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $213,000, as last year? (Round your answer to the nearest whole unit) Number of billis 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income. $213.000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 64,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reqs Reg4 Red SA Assume the new plant is built and that next year the company manufactures and is 64,000 balls the same number as sold last year). Prepare contribution format income statement and compute the degree of operating leverage (Round "Degree of operating leverage to 2 decimal places) Northwood Company Contribution Income 0 Degree of operation